RESULTS FOR THE 3 AND 6 MONTHS ENDED JUNE 30, 2021

GALANTAS GOLD CORPORATION

TSXV & AIM: Symbol GAL

GALANTAS REPORTS FINANCIAL RESULTS FOR THE QUARTER ENDED JUNE 30, 2021

August 31, 2021: Galantas Gold Corporation (the 'Company') is pleased to announce its unaudited financial results for the Quarter ended June 30, 2021.

Financial Highlights

Highlights of the second quarter 2021 results, which are expressed in Canadian Dollars, are summarized below:

Sales revenue for the quarter ended June 30, 2021 amounted to $ Nil compared to revenue of $ Nil for the quarter ended June 30, 2020. Shipments of concentrate commenced during the third quarter of 2019. Concentrate sales provisional revenues totalled US$ 218,000 for the second quarter of 2021 compared to US $ Nil for the second quarter of 2020. Until the mine commences commercial production, the net proceeds from concentrate sales are being offset against development assets.

The Net Loss for the quarter ended June 30, 2021 amounted to $ 2,888,568 (2020: $792,141) and the cash inflow from operating activities before changes in non-cash working capital for the quarter ended June 30, 2021 amounted to $144,806 (2020: ($294,582)). The difference in the net loss is mainly due to stock based compensation and warrant issue costs from financing activities.

The Company had a cash balance of $6,142,477 at June 30, 2021 compared to $ 199,953 at June 30, 2020. The working capital surplus at June 30, 2021 amounted to $ 4,505,905 compared to a working capital deficit of $7,700,406 at June 30, 2020.

Exploration

The Company during the month of July initiated an initial 4,000 metre Phase 1 drill program targeting the Joshua vein from surface and targeting the Kearney vein from underground drilling.

Mine Development

Safety is a high priority and the company continued to invest in safety-related training and infrastructure. The zero lost time accident rate since the start of underground operations continues. Environmental monitoring demonstrates a high level of regulatory compliance. With the new management and operations team in place, detailed review of mine plans and production profile are ongoing.

"The Company has made great strides in advancing the Omagh project with the commencement of drilling to increase the confidence of resources for mine planning while also looking to expand known resources. Operationally the Company has secured critical new mining equipment to support mining activities while strengthening site management and operations team as we commence a phased restart of operations", commented Mario Stifano, CEO.

The detailed results and Management Discussion and Analysis (MD&A) are available on www.sedar.com and www.galantas.com and the highlights in this release should be read in conjunction with the detailed results and MD&A. The MD&A provides an analysis of comparisons with previous periods, trends affecting the business and risk factors.

Click on, or paste the following link into your web browser, to view the associated PDF document.

http://www.rns-pdf.londonstockexchange.com/rns/1056K_1-2021-8-30.pdf

Qualified Person

The financial components of this disclosure has been reviewed by Alan Buckley (Chief Financial Officer) and the production and permitting components by Brendan Morris (COO), qualified persons under the meaning of NI. 43-101. The information is based upon local production and financial data prepared under their supervision.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws, including revenues and cost estimates, for the Omagh Gold project. Forward-looking statements are based on estimates and assumptions made by Galantas in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that Galantas believes are appropriate in the circumstances. Many factors could cause Galantas' actual results, the performance or achievements to differ materially from those expressed or implied by the forward looking statements or strategy, including: gold price volatility; discrepancies between actual and estimated production, actual and estimated metallurgical recoveries and throughputs; mining operational risk, geological uncertainties; regulatory restrictions, including environmental regulatory restrictions and liability; risks of sovereign involvement; speculative nature of gold exploration; dilution; competition; loss of or availability of key employees; additional funding requirements; uncertainties regarding planning and other permitting issues; and defective title to mineral claims or property. These factors and others that could affect Galantas's forward-looking statements are discussed in greater detail in the section entitled "Risk Factors" in Galantas' Management Discussion & Analysis of the financial statements of Galantas and elsewhere in documents filed from time to time with the Canadian provincial securities regulators and other regulatory authorities. These factors should be considered carefully, and persons reviewing this press release should not place undue reliance on forward-looking statements. Galantas has no intention and undertakes no obligation to update or revise any forward-looking statements in this press release, except as required by law.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Enquiries

Galantas Gold Corporation Mario Stifano - CEOEmail: [email protected]Website: www.galantas.comTelephone: 001 416 453 8433

Grant Thornton UK LLP (Nomad)

Philip Secrett, Harrison Clarke, George Grainger:

Telephone: +44(0)20 7383 5100

Panmure Gordon & Co (AIM Broker & Corporate Adviser) 

Nick Lovering, Hugh Rich:

Telephone: +44(0)20 7659 1234 

GALANTAS GOLD CORPORATION

Condensed Interim Consolidated Financial Statements

(Expressed in Canadian Dollars)

(Unaudited)

Three and Six Months Ended June 30, 2021

NOTICE TO READER

The accompanying unaudited condensed interim consolidated financial statements of Galantas Gold Corporation (the "Company") have been prepared by and are the responsibility of management. The unaudited condensed interim consolidated financial statements have not been reviewed by the Company's auditors.

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Financial Position

(Expressed in Canadian Dollars)

(Unaudited)

The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

Going concern (note 1)

Incorporation and nature of operations (note 2)

Contingency (note 16)

Events after the reporting period (note 17)

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Loss

(Expressed in Canadian Dollars)

(Unaudited)

The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Comprehensive Loss

(Expressed in Canadian Dollars)

(Unaudited)

The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

(Unaudited)

The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Changes in Equity

(Expressed in Canadian Dollars)

(Unaudited)

The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements. 

1. Going Concern

These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis which contemplates that Galantas Gold Corporation (the "Company") will be able to realize assets and discharge liabilities in the normal course of business. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. Management is aware, in making its assessment, of uncertainties related to events or conditions that may cast doubt on the Company's ability to continue as a going concern. The Company's future viability depends on the consolidated results of the Company's wholly-owned subsidiary Cavanacaw Corporation ("Cavanacaw"). Cavanacaw has a 100% shareholding in both Flintridge Resources Limited ("Flintridge") who are engaged in the acquisition, exploration and development of gold properties, mainly in Omagh, Northern Ireland and Omagh Minerals Limited ("Omagh") who are engaged in the exploration of gold properties, mainly in the Republic of Ireland. The Omagh mine has an open pit mine, which was in production until 2013 when production was suspended and is reported as property, plant and equipment and as an underground mine which having established technical feasibility and commercial viability in December 2018 has resulted in associated exploration and evaluation assets being reclassified as an intangible development asset and reported as property, plant and equipment.

The going concern assumption is dependent upon forecast cash flows being met, further financing currently being negotiated. The directors assumptions in relation to future levels of production, gold prices and mine operating and capital costs are crucial to forecast cash flows being achieved. Should production be significantly delayed, revenues fall short of expectations or operating costs and capital costs increase significantly, there may be insufficient cash flows to sustain day to day operations without seeking further finance.

Negotiations with current finance providers to extend short-term loans have progressed positively and the maturity dates for both the G&F Phelps Ltd. ("G&F Phelps") and Ocean Partners loans have now been extended to December 31, 2023. The Company also raised gross proceeds of $8M through the issuance of shares to new and current investors to meet the financial requirements of the Company for the foreseeable future. Based on the financial projections prepared, the directors believe it's appropriate to prepare the unaudited condensed interim consolidated financial statements on the going concern basis.

As at June 30, 2021, the Company had a deficit of $52,074,331 (December 31, 2020 - $48,545,800). Comprehensive loss for the six months ended June 30, 2021 was $3,823,825 (six months ended June 30, 2020 - $1,759,878). These conditions raise material uncertainties which may cast significant doubt as to whether the Company will be able to continue as a going concern. However, management is confident that it will continue as a going concern. However, this is subject to a number of factors including market conditions.

These unaudited condensed interim consolidated financial statements do not reflect adjustments to the carrying values of assets and liabilities, the reported expenses and financial position classifications used that would be necessary if the going concern assumption was not appropriate. These adjustments could be material.

2. Incorporation and Nature of Operations

The Company was formed on September 20, 1996 under the name Montemor Resources Inc. on the amalgamation of 1169479 Ontario Inc. and Consolidated Deer Creek Resources Limited. The name was changed to European Gold Resources Inc. by articles of amendment dated July 25, 1997. On May 5, 2004, the Company changed its name from European Gold Resources Inc. to Galantas Gold Corporation. The Company was incorporated to explore for and develop mineral resource properties, principally in Europe. In 1997, it purchased all of the shares of Omagh which owns a mineral property in Northern Ireland, including a delineated gold deposit. Omagh obtained full planning and environmental consents necessary to bring its property into production.

The Company entered into an agreement on April 17, 2000, approved by shareholders on June 26, 2000, whereby Cavanacaw, a private Ontario corporation, acquired Omagh. Cavanacaw has established an open pit mine to extract the Company's gold deposit near Omagh, Northern Ireland. Cavanacaw also has developed a premium jewellery business founded on the gold produced under the name Galántas Irish Gold Limited ("Galántas"). As at July 1, 2007, the Company's Omagh mine began production and in 2013 production was suspended. On April 1, 2014, Galántas amalgamated its jewelry business with Omagh.

On April 8, 2014, Cavanacaw acquired Flintridge. Following a strategic review of its business by the Company during 2014 certain assets owned by Omagh were acquired by Flintridge.

On April 17, 2020, the Company completed a share consolidation of its share capital on the basis of ten existing common shares for one new common share consolidation.

The Company's operations include the consolidated results of Cavanacaw, and its wholly-owned subsidiaries Omagh, Galántas and Flintridge.

The Company's common shares are listed on the TSX Venture Exchange ("TSXV") and London Stock Exchange AIM under the symbol GAL. The primary office is located at The Canadian Venture Building, 82 Richmond Street East, Toronto, Ontario, Canada, M5C 1P1.

In March 2020, the World Health Organization declared coronavirus (COVID-19) a global pandemic. This contagious disease outbreak, which has continued to spread, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company's business or ability to raise funds.

3. Basis of Preparation

Statement of compliance

The Company applies International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC"). These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements.

The policies applied in these unaudited condensed interim consolidated financial statements are based on IFRS issued and outstanding as of August 27, 2021 the date the Board of Directors approved the statements. The same accounting policies and methods of computation are followed in these unaudited condensed interim consolidated financial statements as compared with the most recent annual consolidated financial statements as at and for the year ended December 31, 2020. Any subsequent changes to IFRS that are given effect in the Company's annual consolidated financial statements for the year ending December 31, 2021 could result in restatement of these unaudited condensed interim consolidated financial statements.

4. Accounts Receivable and Prepaid Expenses

Prepaid expenses includes advances for consumables and for construction of the passing bays in the Omagh mine.

The following is an aged analysis of receivables:

5. Inventories

 6. Property, Plant and Equipment

(i) Development assets are expenditures for the underground mining operations in Omagh.

7. Exploration and Evaluation Assets

8. Decommissioning Liability

The Company's decommissioning liability is a result of mining activities at the Omagh mine in Northern Ireland. The Company estimated its decommissioning liability at June 30, 2021 based on a risk-free discount rate of 1% (December 31, 2020 - 1%) and an inflation rate of 1.50% (December 31, 2020 - 1.50%). The expected undiscounted future obligations allowing for inflation are GBP 330,000 and based on management's best estimate the decommissioning is expected to occur over the next 5 to 10 years. On June 30, 2021, the estimated fair value of the liability is $594,906 (December 31, 2020 - $598,275). Changes in the provision during the six months ended June 30, 2021 are as follows:

As required by the Crown in Northern Ireland, the Company is required to provide a bond for reclamation related to the Omagh mine in the amount of GBP 300,000 (December 31, 2020 - GBP 300,000), of which GBP 300,000 was funded as of June 30, 2021 (GBP 300,000 was funded as of December 31, 2020) and reported as long-term deposit of $513,780 (December 31, 2020 - $521,430).

9. Accounts Payable and Other Liabilities

Accounts payable and other liabilities of the Company are principally comprised of amounts outstanding for purchases relating to exploration costs on exploration and evaluation assets, general operating activities and professional fees activities.

The following is an aged analysis of the accounts payable and other liabilities:

10.  Financing Facilities

Amounts payable on the Company's financial facilities are as follow:

(i) In April 2018, the Company signed a concentrate pre-payment agreement and loan facility for US$1.6 million with a United Kingdom based company (the "Lender"), with a maturity date of December 31, 2020. The interest was set at US$ 12 month LIBOR + 8.75% and payable monthly. No interest shall be charged for 6 months and repayments commenced against deliveries in 2019. There was a US$25,000 arrangement fee.

In respect of the loan facility, a fixed and floating security, subordinated to an existing security to G&F Phelps, is being put in place over Flintridge assets. G&F Phelps has a first charge on Flintridge assets in respect of its loan facility and the Lender required an intercreditor agreement between G&F Phelps and the Lender.

As consideration for the loan facility, the United Kingdom based company received 1,500,000 bonus warrants of the Company. Each bonus warrant is exercisable into one common share of the Company and is subject to an initial four months plus one day hold period from the date of issuance of the bonus warrants. The bonus warrants have a maximum life of two years (the "Expiry Time"). On April 19, 2018, the 1,500,000 bonus warrants were granted. In the event that the weighted average closing price per common share of the Company is more than $2.00 per share for more than five consecutive trading days, the Company shall be entitled to accelerate the Expiry Time to a date that is 30 days from the date on which the Company announces the accelerated Expiry Time by press release.

The fair value of the 1,500,000 bonus warrants was estimated at $786,000 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 113.55%, risk-free interest rate - 1.91% and an expected average life of 2 years.

On July 9, 2020, the Company amended the terms of its loan facility of an increase in the outstanding loan facility. The amount of the loan facility increased by US$200,000 to a total of US$1.8 million. On November 12, 2020, the additional US$200,000 loan facility was drawn down by the Company. The interest rate applicable on the loan facility increased from US$ 12 month LIBOR + 8.75% to US$ 12 month LIBOR + 9.9% and the maturity date was extended from December 31, 2020 to December 31, 2021. Interest could be rolled into the loan facility until December 31, 2021, at the Company's option.

As consideration for amending the terms of the loan facility, the Lender received on August 14, 2020, 1,700,000 bonus warrants of Galantas ("Bonus Warrants"). Each Bonus Warrant will be exercisable for one common share of Galantas (a "Bonus Share") at an exercise price of $0.33 per Bonus Share. The Bonus Warrants will expire on December 31, 2021 (the "Expiry Date") and the Bonus Shares will be subject to an initial four month plus one day hold period from the date of their issuance. In the event that the weighted average closing price per common share of the Company is more than $0.4125 per share for more than five consecutive trading days, the Company shall be entitled to accelerate the Expiry Date to a date that is 30 days from the date on which the Company announces the accelerated Expiry Date by press release.

The fair value of the 1,700,000 bonus warrants was estimated at $340,000 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 165.75%, risk-free interest rate - 0.27% and an expected average life of 1.38 years.

The maturity date of the loan facility due on December 31, 2021 has been extended to December 31, 2023. Interest may be deferred and added to the balance outstanding until March 31, 2022, at which point interest will be paid monthly. The 1,700,000 Bonus Warrants issued have been extended.

(i) (continued) The Company recorded the incremental difference of $251,000 as financing costs based on the fair value of these warrants immediately prior to and after the modification. The fair value of the 1,700,000 Bonus Warrants was valued immediately prior to the subsequent extension using the following Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 123.98% to 144.48%, risk-free interest rate - 0.32% and an expected average life of 0.63 to 2.63 years.

This amendment to the loan facility is considered to be a modification of debt, accordingly, the fair value variances originated by the amendment of $83,182 was immediately recorded under financing costs in the unaudited condensed interim consolidated statements of a loss.

During the three and six months ended June 30, 2021, the Company recorded accretion expense of $25,145 and $126,949, respectively in the unaudited condensed interim consolidated statements of loss in regards with this loan facility (year ended December 31, 2020 - $360,452).

During the three and six months ended June 30, 2021, the Company recorded interest expense of $39,660 and $86,820, respectively in the unaudited condensed interim consolidated statements of loss in regards with this loan facility (year ended December 31, 2020 - $214,377).

During the three and six months ended June 30, 2021, the Company recorded a repayment of $nil and $23,802, respectively in regards with this loan facility (year ended December 31, 2020 - $49,705).

As at June 30, 2021, the Lender and the Company have a common director. As a result, the balance due to the Lender was reallocated from financing facilities to due to related parties. Total balance reallocated consisted of $2,577,137. Refer to note 14(a)(iii).

(ii) In connection with the closing of the private placement completed on May 14, 2021 (refer to note 11(b)(i)), Roland Phelps has retired as the Company's President and Chief Executive Officer and as a member of the Board of Directors. As a result, the balance due to G&F Phelps, a company controlled by Roland Phelps was reallocated from due to related parties to financing facilities. Total balance reallocated consisted of $3,163,593 (GBP 1,824,764) amalgamated loans balance and $1,414,446 (GBP 815,854) interest accrued balance. Refer to note 14(a)(ii).

As at June 30, 2021, G&F Phelps had amalgamated loans to the Company of $3,125,108 (GBP 1,824,774) (December 31, 2020 - $3,171,622 - GBP 1,824,764) included with financing liabilities (December 31, 2020 - due to related parties) bearing interest at 2% above UK base rates, repayable on demand and secured by a mortgage debenture on all the Company's assets. In April 2018, the interest increased to 6.75% + US$ 12 month LIBOR. Interest accrued on G&F Phelps loan is included with financing liabilities (December 31, 2020 - included with due to related parties). As at June 30, 2021, the amount of interest accrued is $1,476,366 (GBP 862,061) (December 31, 2020 - $1,339,503 - GBP 770,671). 

The maturity date of the G&F Phelps loan has been extended to December 31, 2023. Interest may be deferred and added to the balance outstanding until March 31, 2022, at which point interest will be paid monthly. In consideration for extending the G&F loan and deferring interest, G&F Phelps has received, subject to regulatory approval, 1,700,000 warrants exercisable into one common share at an exercise price of $0.33, with said warrants expiring on December 31, 2023. 

The fair value of the 1,700,000 warrants was estimated at $670,000 using the following Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 123.98% to 144.48%, risk-free interest rate - 0.32% and an expected average life of 2.63 years. The $670,000 was recorded as financing costs in the unaudited condensed interim consolidated statements of a loss.

11.  Share Capital and Reserves

a) Authorized share capital

At June 30, 2021, the authorized share capital consisted of an unlimited number of common and preference shares issuable in Series.

The common shares do not have a par value. All issued shares are fully paid.

No preference shares have been issued. The preference shares do not have a par value.

b)  Common shares issued

At June 30, 2021, the issued share capital amounted to $57,559,598. The continuity of issued share capital for the periods presented is as follows:

(i) On May 14, 2021, Galantas completed a private placement of 26,663,264 units at a price of $0.30 per unit for aggregate gross proceeds of $7,998,980. Each unit comprises one common share and one common share purchase warrant. Each warrant will be exercisable into one additional common share at an exercise price of $0.40 for 24 months from the closing date of the private placement. There is a four-month and one day hold period on the trading of securities issued in connection with this private placement.

The fair value of the 26,663,264 warrants was estimated at $3,258,578 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 155.08%, risk-free interest rate - 0.32% and an expected average life of 2 years.

Ocean Partners acquired 1,666,667 units of the private placement, for consideration of $500,000 and the Company paid a finder's fee of 41,667 units to Ocean Partners resulting in the issuance of 1,708,334 common shares or 2.3% of the Company's issued and outstanding common shares on a non-diluted basis.

The 41,667 units paid as a finder's fee were valued at $20,417. The fair value of the 41,667 warrants was estimated at $8,783 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 155.08%, risk-free interest rate - 0.32% and an expected average life of 2 years.

(i) (continued) Roland Phelps, the Company's retired President and Chief Executive Officer, acquired 166,667 units for consideration of $50,000, increasing his holding to 5,100,484 common shares or 6.9% of the Company's issued and outstanding common shares on a non-diluted basis.

In respect of an under-writing by Ocean Partners, the Company paid a commitment fee of $112,500 in cash.

c)  Warrant reserve

The following table shows the continuity of warrants for the periods presented:

The following table reflects the actual warrants issued and outstanding as of June 30, 2021:

d) Stock options

The following table shows the continuity of stock options for the periods presented: